An MLO is working with a borrower who has a 10% down payment and wants to avoid PMI. The borrower suggests using a piggyback loan structure. Which statement about this arrangement is most accurate?
Correct Answer
C) Both loans must be disclosed separately on the Loan Estimate
When using piggyback loans (such as 80-10-10 structure), both the first and second mortgage must be disclosed separately on the Loan Estimate and Closing Disclosure. This ensures the borrower understands they are taking on two separate loan obligations with potentially different terms and rates.
Why This Is the Correct Answer
When using piggyback loans (such as 80-10-10 structure), both the first and second mortgage must be disclosed separately on the Loan Estimate and Closing Disclosure. This ensures the borrower understands they are taking on two separate loan obligations with potentially different terms and rates.
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An MLO is comparing loan products for a borrower and notices that Lender A's APR is 4.25% while Lender B's APR is 4.18%, but Lender A's interest rate is lower. What most likely explains this discrepancy?
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A property appraisal reveals the value is $50,000 less than the borrower's estimated value provided at application. The loan-to-value ratio changes from 80% to 85%, requiring mortgage insurance. This constitutes: